Mortgage rates have shot up in the past few weeks, and may climb even higher, raising concerns about the recovery of the fragile housing market.

In a move that could signal an end to an era of historically cheap mortgages, rates nationally have jumped to 5.31 percent, according to the Mortgage Bankers Association. That's a sharp increase from the average 5.04 percent that the association reported March 26. Rates had hovered under 5 percent since late last year.

The increase has been sparked by good news on the economy, which has led to higher interest rates on government bonds, and the Federal Reserve's decision to stop propping up the mortgage market, which had kept loan rates low.

South Bay mortgage

(Click to enlarge)brokers said rates here remain slightly lower than the national average. Still, the rise has dampened homeowners' appetite for refinancing. But people looking to buy homes are hoping to lock in rates before they go higher, and first-time buyers are racing to qualify for a federal tax credit of $8,000 before it expires this month.

"We are a long way off from where we were at the beginning of the year," when rates were under 5 percent, said Cathy Warshawsky of Bay Area Loan. Warshawsky, who is president of the valley chapter of the California Association of Mortgage Professionals, said people are calling her "every single day" asking about interest rates.

Housing experts worry that further increases could put the housing market recovery in peril.

A rise in interest rates "is the biggest risk we face in the single-family-home market besides foreclosures," said Ken Rosen of the Fisher Center for Real Estate and Urban Economics at UC Berkeley.

Rosen said he sees a risk of rates rising to 6.5 percent by mid-2011. "If mortgage rates were to rise into the mid-6s, which is possible as Treasury rates go up and the government stops buying mortgages, that could put a big damper on housing market recovery," Rosen said.

An increase from 5 percent to 6 percent on a 30-year, $500,000 mortgage would cost the buyer $313 more a month, an additional $112,914 in interest over the life of the loan.

"It's a wake-up call but not a reason to panic, "said Greg McBride, a senior financial analyst with, which released a national survey Wednesday that pegged average rates at 5.35 percent, the highest since November. "You don't want to sit back and wait much longer."

The California Association of Realtors is predicting rates will continue to rise, though exactly when and by how much is not clear. "I think a year from now, rates could be up 5.5 to 5.6 percent," said Leslie Appleton-Young, the group's chief economist.

But rates are only part of the picture. Buying a home has become much more difficult, with lenders requiring stellar credit ratings, big down payments and preferring to lend to buyers with ample income, Appleton-Young said. "Rates are relevant, but underwriting is a lot more rational and looks more like it did 10 or 15 years ago," she said.

It all worked out for Richard Fong, 24, who is getting the $8,000 federal credit on his first home, purchased with a 20 percent down payment. Fong, who works for a Mountain View biotech company, locked in a 4.75 interest rate in January on a loan to buy a $200,000 home in Elk Grove. The rates weren't a major factor, though he's happy with what he got. "I had my broker work out the best numbers for me," he said.

Fong said if rates were in the low to mid-5 percent range, "I'd probably still buy. That's still low enough where you're getting good value for what you're putting in now."

A bigger concern of homebuyers is where prices are headed, said Chris George, president of CMG Mortgage in San Ramon and secretary of the California Mortgage Bankers Association. "They're worrying about whether the house they're buying has a little bit more to go as far as value dropping," George said.

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